When it comes to owning cryptocurrencies like Bitcoin, most investors don’t realize the financial obligations that come attached to this digital asset class, such as submitting their earnings for their personal or business tax reports. In fact, a report generated from Blox, showcasing answers from leading CPAs and firms, found that one CPAs biggest professional challenges are when clients fail to disclose all of their assets – leaving a large gap in the required financial information.
Cryptocurrency accountants and tax professionals have their work cut out for them. A lack of government regulation, best practices from institutions like GAAP, education on crypto taxation and cost-basis calculations create a series of obstacles when it comes to accounting for crypto assets or preparing to file taxes for clients.
These financial professionals are also hindered by a lack of technology for crypto accounting and tax preparation. Moreover, the traditional approach still relies on outdated spreadsheets that require laborious manual data entry and can prove to be inaccurate due to human errors or missing information.
For crypto companies and blockchain businesses, we are highlighting the 7 most important tools needed for cryptocurrency accounting, bookkeeping and tax preparation.
Calculating Cost Basis With Accuracy
The most pressing challenge for accountants or financial professionals when calculating cost basis for crypto is ensuring accurate results. When zooming in on the problem, the other obstacles are apparent: missing data, lack of classification, overuse of spreadsheets and the large volume of transactions can skew the calculation results. Cost basis calculation tools require means of reconciliation to validate results and ensure accuracy. Providing accuracy at scale for companies with thousands of transactions is tricky, but automated solutions to exist and are already replacing traditional approaches to cost basis.
Accounts & Portfolios Keep You Organized
Accountants and bookkeepers understand the necessity behind organization and segregation when serving multiple, dozens or even hundreds of clients. They need intuitive tools to organize according to accounts, portfolios or a specific hierarchy, similar to a chart of accounts. A great example of how this works in the real world would be for mining operations.
Mining income is taxed differently than income from crypto trading, therefore keeping your accounts and portfolios per-client in order, is essential when needing to apply the correct tax treatment. Managing account balances across a variety of portfolios and accounts with hundreds of clients becomes easy and understandable, with a minimal learning curve for new users.
Transaction Table Keeps You In Control
A Transaction Table can provide a more intuitive way to organize and classify all of your clients’ cryptocurrencies and transactions. This gives bookkeepers and accountants a smarter way to effectively track, label and manage assets with more control than ever before. Additionally, the table lets you categorize more details about every transaction your business makes.
A Transaction Table gives a detailed overview of all your account transactions with three levels of classification for ‘Chart of Accounts’ logic. The enhanced organization makes it simple for anyone to easily view corresponding and related transactions and distinguish between different events. Moreover, you can view your entire history of transactions across all exchanges, wallets and synced accounts.
Classify Transactions and Cut Time For Bookkeeping
It’s not enough to just track your assets or transactions. Accountants or bookkeepers should be able to classify and organize them. Bookkeepers responsible for tracking and managing a company’s assets can simply label and classify transactions then categorize them accordingly, saving hours every day on tracking assets and transactions. Relevant official documents, legal notes, and more can all be attached as images to support assets, accounts and transactions when preparing for an audit or taxes.
Some tools also offer a classification book to easily search and manage client classifications for any account or portfolio. As well, bookkeepers can organize taxable transactions on a quarterly basis or with custom filtering options. New additional features such as bulk classifications, can allow bookkeepers to classify large batches of transactions all at once. It’s important for professionals to be empowered with the best tools to save them time and still produce great results.
Price Matching In Real Time
It is important to always match the price as accurately and up-to-the-minute as possible. Blox uses pricing from exchanges for off-chain transactions and will automatically match pricing for on chain transactions on a minute by minute basis. This boosts efficiency compared to using a manual lookup. Bookkeepers can quickly move onto more important tasks that require attention – saving precious time and resources. The mission is to leverage tools that not only solve specific challenges but increase productivity and cut the amount of work time associated with manual human labor using smart automation.
Daily Balance Snapshots
Cryptocurrency accountants or bookkeepers need the option to view a complete overview with detailed daily snapshots of account balances and transaction activity. Users can take advantage of specific filtering options to narrow down results across all of a clients wallets, accounts and exchanges.
For crypto financial professionals, they can view daily balance for reconciliation and verification of historical data for an end-of-day balance report. Additionally, these professionals want to cross-compare against their calculated tax liability, an added benefit that becomes invaluable for managing a businesses assets.
Once bookkeepers and accountants are done with their preparations, tracking, and managing of assets, they may need to bring it into their traditional accounting platform. A highly sought after tools is .CSV importing and exporting. This would enable financial professionals with the ability to export accounts, transactions, activity and daily balance snapshots into a CSV file.
The CSV file can then be easily imported into any general ledger software such as Quickbooks where it can be merged in with the traditional accounting process. For those that use the Blox platform, we have produced a simple informative guide for users wishing to learn how to properly import/export and format CSV files.
The future is bright for crypto accounting, but it will require the help of accountants, bookkeepers and finance professionals. They serve as the financial backbone of brands and businesses and to enable or empower them is imperative for the success of cryptocurrency and its push into the mainstream world.
Blox is an industry leading platform providing CPA’s, accountants, tax preparation specialists and bookkeepers with the necessary solutions to improve productivity, accuracy and simplify their day-to-day finance operations. We understand that businesses need solutions with a minimal learning curve for accountants that are unfamiliar with crypto accounting. They need access to the services with minimal downtime required for learning and on-boarding.